The credit is getting the Asia-Pacific Pharmaceuticals subsidiary out of control

December 25, Asia Pacific Pharmaceuticals lost control of its wholly-owned subsidiary, Shanghai New Peak Biopharmaceutical Co., Ltd. (the "Shanghai New Peak"), when a subsidiary's out-of-control announcement was revealed. As a result of the news, the company's share price opened sharply lower on December 25. Four years ago, Asia Pacific Pharmaceuticals bought Shanghai New Peak at a premium of 900 million yuan, and since then the company's product category has extended from pure chemical pharmaceuticals to outsourcing services for new drug research and development. In 2015-2018, Shanghai's new peak has also become a profitable player for the Asia-Pacific pharmaceutical industry, helping the Asia-Pacific pharmaceutical industry to maintain a high level of profitability. However, now the Asia-Pacific pharmaceutical industry will not only face the new peak in Shanghai goodwill impairment drag down the performance of the situation, but also encountered the New Peak in Shanghai out of control embarrassment.

company's subsidiaryAn out-of-control announcement from a subsidiary was quickly reflected in Asia Pacific Pharmaceuticals' share price performance on December 25. Shares in Asia Pacific Pharmaceuticals narrowed after opening sharply lower at 8.6 per cent on December 25, closing the day down 3.64 per cent at 6.61 yuan per share.The setback in Asia Pacific Pharmaceuticals' share price has nothing to do with an out-of-control announcement by a subsidiary of Asia Pacific Pharmaceuticals. On December 25, Asia Pacific Pharmaceuticals announced that it had sent a working group to Shanghai's new peak on November 25, 2019. From the announcement, the Asia-Pacific Pharmaceutical Industry Sent Working Group to Shanghai new peak from the self-examination found that the company's wholly-owned subsidiary Shanghai New Peak wholly-owned subsidiary Shanghai Xinyuan Pharmaceutical Group Co., Ltd. (hereinafter referred to as "Shanghai Xinyuan") there is a violation of external guarantees, and 2019 operating performance suddenly dropped significantly, in order to fully verify the relevant situation, strengthen subsidiary management, Asia Pacific Pharmaceuticals sent a working group.Asia Pacific Pharmaceuticals, however, has been embarrassed by its subsidiaries getting out of control. In addition to the control measures taken after sending the working group to shanghai's new peak, the Asia-Pacific pharmaceutical industry also said that so far, the Shanghai new peak working group has not been able to take over the shanghai new peak, Shanghai Xinyuan and its subsidiaries a total of 10 companies' seals, business license originals and other key information, can not be controlled. At the same time, Asia Pacific Pharmaceuticals said that Shanghai New Peak and its subsidiaries part of the computer damage, loss of important information, Shanghai New Peak and its subsidiaries, some of the core key management personnel, employees have left before the team stationed, the company can not grasp the Shanghai New Peak and its subsidiaries actual operating situation, asset status and risks and other information, resulting in the company can not shanghai New Peak and its subsidiaries of major business decisions, personnel, assets and other control. Asia Pacific Pharmaceuticals admits that the company has in fact lost control of Shanghai's New Peak and its subsidiaries.It is understood that the new peak in Shanghai is asia-pacific pharmaceutical industry at the end of 2015 mergers and acquisitions. Song Qinghui, an economist, believes that the root cause of the out-of-control subsidiary is the parent company's weak control, the interests of all parties are not well coordinated. In Song Qinghui's view, listed companies in the process of merger and reorganization, to spend more time to demonstrate the advantages and disadvantages of the merger and acquisition program, can not rush to success, while learning the market above the merger and acquisition lessons, to avoid the past detours.

an important source ofAccording to a broker in Beijing who did not want to be named, the loss of control of subsidiaries would undoubtedly have a significant impact on listed companies, and the extent of the impact would be conceivable if they were important subsidiaries."Given that the Company has lost control of Shanghai New Peak and its subsidiaries and will no longer include it in the consolidated statements, the Company's loss of control over Shanghai New Peak and its subsidiaries will have a significant impact on the Company's financial statements for 2019." Asia Pacific Pharmaceuticals said in a statement that the new peak in Shanghai was out of control and had an impact on the company.It should be pointed out that from the previous year's financial data, Shanghai's new peak can be said to be the Asia-Pacific pharmaceutical industry's profitability. Data show that in 2016-2018, Asia Pacific Pharmaceuticals achieved net profit attributable to 125 million yuan, 202 million yuan and 208 million yuan, respectively, while Shanghai New Peak achieved net profit of 114 million yuan, 149 million yuan and 152 million yuan, respectively. Based on the above financial data, the net profit achieved by Shanghai New Peak in 2016-2018 accounted for 91.2%, 73.76% and 73.08% of the net profit attributable to Asia Pacific Pharmaceuticals, respectively.In the first half of 2019, Asia Pacific Pharmaceuticals achieved net profit attributable to RMB40,239.1 million, compared with RMB41,544.9 million for Shanghai's new peak during the same period.

commitment period just after the performance decline isReporters found that although shanghai's new peak to the profits of listed companies contribute more, but from the shanghai new peak's own performance, the first half of 2019 Shanghai's new peak net profit fell significantly year-on-year. Data show that in the first half of 2018, Shanghai's new peak net profit of 85.6018 million yuan. It is important to note that 2019 is the first year after the end of the new peak performance commitment period in Shanghai.Back in history, Shanghai's new peak was acquired by Asia Pacific Pharmaceuticals at a premium of 900 million yuan at the end of 2015. At that time, with July 31, 2015 as the benchmark date for the assessment, the total equity value of Shanghai New Peak shareholders using the income method was assessed at 902.2 million yuan, with an assessment value-added of 732.8628 million yuan, with a value-added rate of 432.78 percent. Through mergers and acquisitions, the Asia-Pacific pharmaceutical product category extends from pure chemical pharmaceuticals to new pharmaceutical research and development outsourcing services.Under the Compensation Agreement between Asia Pacific Pharmaceuticals and Green Villa Holdings Ltd. and its de facto controller, Ren Jun, the restructured partner, Green Villa Holdings Ltd., made performance commitments and compensation arrangements for the new peak in Shanghai. Among them, the forecast profit compensation period for the transaction is 2015-2018, the annual net profit achieved in the four years is not less than 85 million yuan, 106.25 million yuan, 132.81 million yuan and 16.602 million yuan.Judging from the performance commitments disclosed by Asia Pacific Pharmaceuticals in April 2019, the cumulative net profit of Shanghai's new peak commitment period reached the performance commitment. However, for a single year, shanghai's new peak performance commitment completion rate for 2018 was 87.86%, with the 2015-2017 performance commitment completion rate exceeding 100%.In fact, before shanghai's new peak spiraled out of control, Asia-Pacific pharmaceutical mergers and acquisitions "stepped on the thunder" has already come to an end. In its third-quarter 2019 report, Asia Pacific Pharmaceuticals expects full-year net profit to shift from earnings to a huge loss of RMB650 million to RMB750 million. One of the reasons for the sharp pre-loss is the sharp decline in Shanghai's new peak performance, which is estimated to take into account goodwill impairment losses of no more than 670 million yuan in 2019.In response to the subsidiary out of control related issues, the reporter has called the Asia-Pacific pharmaceutical industry for an interview, and should be asked to send an interview letter to the other side. As of press time, the other side has not yet responded.
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Beijing Business Journal)
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